Pull back the orange-coloured bomb and aim it for the chimney. Release the mouse button to throw. Try to make the bomb go down the chimney and blow up the elves' house. It MUST go down the chimney for the house to blow up, as the homeowners have made the house bomb-proof.
Santa wanted to do this as a Christmas prank! He doesn't mind ending up on the naughty list (after all, he wrote it). Ho-ho-ho!